Legal v Beneficial owner & TRANSFER Procedure(Transfer - Funding options: debt and equity - Finance)- FS Flashcards
(36 cards)
What document evidences a person’s legal status as a shareholder?
Entry into the register of members serves as the definitive evidence of a person’s status as a legal shareholder of the company.
What does the term “beneficial owner” mean in the context of a share transfer?
A beneficial owner is someone who has beneficial interest in the shares (e.g., economic benefits), but lacks legal ownership until registered.
What procedural safeguard is provided by board approval requirements in share transfers?
Board approval requirements allow directors to control who may become a shareholder, protecting the structure and strategic interests of the company
What is the key legal difference between the transfer and allotment of shares?
Allotment involves issuing new shares by the company, whereas a transfer involves the movement of existing shares from one shareholder to another, typically through sale or gift.
At what point does a transferee become the legal owner of shares in a private company?
The transferee becomes the legal owner only when their name is entered into the company’s register of members, as required by Section 113 of the Companies Act 2006.
What is the status of a person who has agreed to receive shares but is not yet listed in the register of members?
That person is the beneficial owner of the shares but not yet the legal owner, and therefore does not yet have shareholder rights such as voting or receiving notices.
What rights does a shareholder gain upon being entered in the register of members?
The shareholder gains legal ownership and acquires full shareholder rights, including the right to vote, receive dividends, and attend meetings.
Which statutory provision requires a company to maintain a register of members?
Section 113 of the Companies Act 2006 mandates that every company must keep a register of its members and record the date of entry for each member.
What is the practical consequence of the time gap between share transfer and register update?
During this interim period, the seller remains the legal owner, while the buyer is only the beneficial owner with no enforceable shareholder rights until registration
Can the transfer of shares in a private company occur without board approval?
Not usually. Most private company articles of association include a provision requiring board approval (typically by board resolution) before a transfer can be registered.
Is the buyer of shares entitled to vote at general meetings before being entered in the register?
No. The buyer does not have voting rights until their name appears in the register of members.
What formalities must be satisfied for a share transfer to take effect legally?
The transferee’s name must be approved (if required by the board) and then entered into the register of members maintained under Section 113.
What document must the selling shareholder complete and sign to initiate a transfer of shares?
The selling shareholder must complete and sign a stock transfer form, which is then handed to the buyer to effect the share transfer.
What is the threshold for stamp duty liability in a share transfer?
If the value of the transfer exceeds £1,000, stamp duty is payable by the buyer. If the value is £1,000 or less, no stamp duty is due.
Who is responsible for paying stamp duty in a share transfer transaction?
The buyer of the shares is responsible for paying stamp duty, if applicable, based on the value of the transaction.
What is the nominal value of a share, and how is it relevant in a transfer?
The nominal value is the face value of a share (e.g., £1 per share) and is used to calculate the total value of the transfer for stamp duty purposes.
How long does a company have to issue a new share certificate to the transferee?
The company must issue a new share certificate to the buyer within two months of the transfer being registered.
Within what time frame must a company update its register of members after a share transfer?
The register of members must be updated within two months to reflect the new shareholder’s entry.
How and when does Companies House become aware of a private share transfer?
The transfer is reflected in the company’s records when it files its annual confirmation statement with Companies House.
Under what condition must the register of persons with significant control (PSC) be updated following a share transfer?
If the incoming shareholder acquires more than 25% of the voting rights or shares, the PSC register must be updated.
If neither the outgoing nor the incoming shareholder holds more than 25% of shares, is the PSC register affected?
No update is required to the PSC register if the transferred shareholding does not exceed 25% of the company’s shares or voting rights.
What role does the share certificate play in a share transfer?
The share certificate serves as evidence of legal title once the buyer is registered as a shareholder in the company’s register of members.
Can a company refuse to register a share transfer?
Yes, under the articles of association, particularly in private companies, the board may have the power to refuse registration of a transfer, usually through a board resolution.
What is the key legal step that finalises the transferee’s status as a shareholder?
The entry of the transferee’s name into the register of members is what confers legal ownership and full shareholder rights.
